If Sen. Kamala Harris and her advisors had consulted with people who know what drives decision-making at big health insurance companies, she surely would never have put privately operated Medicare Advantage plans at the center of her health care reform proposal this week. 

They clearly didn’t take the time to look at even recent news reports, much less learn what has happened in the past when the government has tried to do what she is proposing. 

In her Medium post, Harris said that her plan would allow private insurers to offer Medicare plans but that they would “adhere to strict Medicare requirements on costs and benefits.”

She went on to write that the Medicare Advantage plans “will be held to stricter consumer protection standards than they are today, such as getting reimbursed less than what the Medicare plan will cost to operate, to ensure that they are delivering meaningful value and unable to profit off of gaming consumers or the government…

“Essentially, we would allow private insurance to offer a plan in the Medicare system, but they will be subject to strict requirements to ensure it lowers costs and expands services. If they want to play by our rules, they can be in the system. If not, they have to get out.”

And get out they would, leaving millions of Americans scrambling, as happened two decades ago when I was still in my job as head of communications at Cigna. 

During the 1990s when the Clintons were in the White House, privately operated Medicare managed care plans grew at a fast clip, from about 2 million in 1993 to more than 6 million in 1998, according to the U.S. Government Accountability Office. But big problems began to emerge.

For one thing, as the GAO noted in a September 2000 report, insurers had little interest in marketing their plans to people in rural areas. For another, the plans also had little interest in covering people who had health problems. Numerous studies found that private Medicare plans “tended to attract beneficiaries with lower-than-average health costs.” That’s because insurance companies implemented sales and marketing plans that targeted the healthiest people in a given market. 

As a result, according to the GAO, the government “was not realizing the expected savings” that advocates of private Medicare plans had promised. In fact, it became clear that the government was significantly overpaying insurance companies that operated the private plans. 

So in 1997, Congress passed legislation to both encourage the wider availability of private Medicare plans (then called Medicare+Choice) and to slow the growth of payments to insurers.  In other words, to do exactly what Harris is now proposing. 

Insurers responded by heading for the exits. 

As the GAO reported, nearly 100 plans “either terminated their contracts and fully withdrew from the program or partially withdrew by reducing the geographic areas they served for the 1999 contract year.” It got even worse the next year: 118 plans announced they would terminate their contracts or reduce service areas. More than 1.3 million Americans were affected. Many found that there were no private plans available to them. Many others saw their benefits cut and their premiums go up. 

Insurance company shareholders were not happy, as you can imagine. Managed Care Outlook, a trade publication, reported in July 1999 that insurance companies claimed the budget cuts mandated by the 1997 law made it impossible for them to operate profitably in many markets. 

Cigna was one of many insurers to bail out of the Medicare+Choice program, and my team was responsible for announcing that decision. 

On Friday afternoon, June 2, 2000, we sent out a press release saying the company was abandoning all but two of its Medicare+Choice markets. Among the many markets affected was Los Angeles. As the Los Angeles Times reported the next day, Cigna’s decision meant that more than 100,000 seniors across the country would have to find new health insurance. The story went on to note that, “health plans have dumped 750,000 Medicare beneficiaries from their rolls since 1998.” 

Among those quoted was Linda Bergthold, a Santa Clara-based health care analyst and consultant. “For the lowest tier of elderly, this is really a dramatic problem,” she said. “It’s extremely disruptive and difficult.”

Also quoted was Carolyn Boyer, a Cigna health plan member who the Times said was battling an aggressive form of breast cancer. “We’re just devastated,” she said. 

Then there was this dramatic quote from the health insurance industry’s top lobbyist at the time, Karen Ignani: 

“The program is in free fall. We’re in the middle of a real crisis.”

At the center of that crisis was Wall Street. The reason the big, for-profit insurers fled the Medicare+Choice program was because their investors and Wall Street financial analysts would not tolerate the slimmer profit margins caused by the 1997 law.

When George W. Bush took office in 2001, Republicans, bent on privatizing Medicare, set out to bring the program back to life. Soon after the GOP took control of both the House and Senate in 2003, Congress passed The Medicare Prescription Drug, Improvement, and Modernization Act, major portions of which were written by lobbyists for drug and insurance companies. That law changed the name of the program from Medicare+Choice to Medicare Advantage—and all but assured that it would become a major new cash cow for health insurers. 

Cigna and most of the other companies got back into the business, largely because they were now able to game the system to their advantage (pun intended.)

Medicare Advantage has become so lucrative than many of the big insurers now take in more revenue from the government than from the private sector. 

Insurers have learned to game the system so well, in fact, they federal officials acknowledge insurers have overbilled the government more than $30 billion over just last three years alone. And that is after the passage of the Affordable Care Act, which sought to reduce the overbilling. It was worse before the ACA was fully implemented. Between 2008 and 2013 the government improperly paid Medicare Advantage plans by nearly $70 billion. 

Among the few reporters who have reported on this is Fred Schulte, a former colleague of mine at the Center for Public Integrity who now writes for Kaiser Health News.

I encourage Sen. Harris and her advisors to check out Fred’s reporting over the past several years. (Google Fred Schulte and Medicare Advantage and you’ll see reporting that every American, certainly every presidential candidate and every member of Congress, should read.) If Sen. Harris had only read the headline of the story Fred and fellow reporter Lauren Weber wrote just two weeks ago, they surely would not have made Medicare Advantage the centerpiece of her new plan to keep private insurers in control of our health care system. 

Here’s that story:

Insurers Running Medicare Advantage Plans Overbill Taxpayers By Billions As Feds Struggle To Stop It